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Chapter 6
Social Empowerment
Through Islamic Finance
Mustapha Abubakar
Ahmadu Bello University, Nigeria

ABSTRACT
Islamic social finance as an order ordained by Allah (Subhanahu wa Taala) for the benefit of mankind,
seeks to provide an avenue for financial inclusion as well as entrenching social cohesion among Muslim
communities across the globe. This is achieved with the application of Zakat (compulsory alms giving),
Waqf (Islamic endowment), Sadaqah (Voluntary charity giving), and Qard (Loan giving) as the instru-
ments. As poverty remains a social disorder and an affront to human prosperity, Islam has provided a
remedy to its scourge. This chapter presents a discussion on poverty reduction if these instruments are
effectively implemented in Muslim communities across the globe.

INTRODUCTION

Sadly, Islamic Development Bank (IDB) member countries are known to be home to nearly one-third
of the world’s multi-dimensional poor people. It is estimated that 504 million people in 43 out of the 57
IDB countries, mainly in South Asia and Sub-Saharan Africa, are living in multi-dimensional poverty,
and are suffering from a range of deprivations (Islamic Solidarity Fund for Development ISFD Strategy
2016-2025). Ironically, in the midst of this situation is the phenomenal growth of the Islamic financial
services industry (IFSI), which has been growing rapidly over the past decade. In some specific jurisdic-
tions, the share of the Islamic banking sector has become large and systematically important. Thus, it is
clear that the demand for Islamic banking is growing and notably in some markets, with predictions that
more conventional banks will convert into Islamic banks. However, Islamic financial institutions that exist
in a dominantly conventional environment, have despite the theoretical assumption of being ethical, as
well as their remarkable levels of expansion, received barrage of criticisms on their lack of contribution
to the aspirations of Shari’ah and Islamic socio-economic objectives as noticed in literature. (Badr, 2006)

DOI: 10.4018/978-1-7998-0218-1.ch006

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Social Empowerment Through Islamic Finance

Thus, in many countries, eradicating poverty is one of the biggest global concerns and remains
an essential requirement for continuous development. This is more so in Muslim countries where the
Islamic perspective on the concept of basic income as an issue arises. It is a matter of consideration
while discussing Islamic social finance and it positive impacts on Ummah. As governments struggle to
tackle growing phenomenon of inequality in human societies, coupled with the apparent short-comings
of the welfare state, the changing and phenomenal technological challenges to the labour-force, and the
changing nature of work in the twenty-first century, the basic income concept is gaining attention from
wide spectrum of stakeholders.
According to the IFSB draft exposure document on Technical note 3 on financial inclusion and Is-
lamic finance released in November 2018, estimates suggest that, on average, approximately 9% of the
population across 35 selected Muslim-majority countries financially exclude themselves from the formal
financial sector due to religious reasons. This translates into nearly 40 million individuals financially
excluded from the formal financial system, thus representing a specific gap for the IFSI to bridge. In many
jurisdictions, several different efforts have been undertaken in a number of aspects to realise poverty
reduction goals, such as raising education levels, improving the provision of medical care, enhancing-
socio-economic standard among the poor and last but not the least, offering loans to small and micro
sized business entities. In spite of all the several efforts, poverty remained a recurring decimal across
vast majority of the Muslim Ummah globally.
Against the foregoing therefore, an imperative for soul searching, pondering, and reflections on what
went wrong and what next that must be done or revisited is clear, in attempts to effectively struggle
with the scourge of poverty in Muslim Ummah across the globe. This is more so as the religion of Is-
lam is not confined to spirituality dimension only, and is intended as a universal religion that asserts
itself in Muslim community affairs, with the aim of guaranteeing the general welfare of society. Thus,
it is of noteworthy here to mention the four major Islamic social finance instruments/tools in Islamic
finance which are Sadaqah, Waqf, Zakat and Islamic micro-financing (based on Qard contract), that
are veritable tools of empowerment of the Muslim Ummah. Furthermore, it is evident that these tools of
Islamic social finance are concretely more often than not outside the scope of operations of core Islamic
finance institutions. Sadaqah is a voluntary charitable contributions aimed at protecting and preserving
the rights of less privileged members of society. Waqf is a voluntary dedication and relinquishment on
permanent basis by an endower, of assets that are both movable and immovable and whose usufructs as
well as cash is utilised for socially beneficial specific purposes, and to specified people as stated by the
endower. Zakat as one of the five pillars of Islam is a mandatory levy imposed on various forms of wealth
to be distributed for the benefit of specified categories of people as ordained by Allah (Subhanahu wa
Taala). Qard means amount extended to a needy person from a debtor as loan, with the only obligation
of paying the amount borrowed on the borrower without addition.
While these tools are undoubtedly effective mechanisms for addressing poverty and enhancing prosperity
of the Muslim Ummah if properly harnessed, twin issues of what constitute poverty in Islamic perspec-
tive, as well as how individual’s characteristics influence their financial inclusion deserve consideration.
On one hand, the researcher notes that various Islamic terms for poverty originate from the root of
the Arabic word for poverty, faqr. More importantly however, is the fact that in Islam, two forms of
poverty are recognised and which are spiritual and material. An illustration of the former is provided in
the following passage of the Qur’an: Indeed you are those who are called to spend in the way of Allah
(Subhanahu wa Taala), yet among you there are some who hoard. And whoever hoards, hoards only
from his soul. And Allah (Subhanahu wa Taala) is the Rich, and you are the poor. And if you turn away,

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He will exchange you for some other people. Then they will not be like you. (47:38). In many verses of
the Holy Qur’an, reference to material poverty is made and Allah (Subhanahu wa Taala) has enjoined
Muslims to strive for helping, protecting, and sheltering poor people. For material poverty, the Qur’an
and Sunnah have made a distinction between two categories of poor: (1) al-faqir and (2) al-miskin. To be
considered al-faqir arise when he/she does not have enough to suffice him or herself, that is not having
any wealth at all, and he/she is unable to earn living by work suitable to them. For al-miskin, it refers to
someone who has some wealth to spend on his/her needs, but that wealth is insufficient; for example,
someone needs $10 per day, but only has $5 or $4. This means that the considerations applicable to poor
people also apply to people who may be having low possession of money.
On the other hand, the researcher recognises that there are specific individual characteristics that
define the extent of financial inclusion. As examined by different researchers, four characteristics of
individuals have showed different influences on levels of financial inclusion. Those characteristics under
study were gender, age, income and education levels.
This chapter therefore will seek to present a thorough discussion on potential to deploy each of the
identified four Islamic social tools of empowerment of the Muslim Ummah, as well proposing improve-
ments and other wide range of issues pertinent to poverty reduction across the Ummah in the world.

BACKGROUND

Basic Income in Islam

Basic Income (BI) is an evolving idea having different names, including Guaranteed Annual Income,
Unconditional Basic Income, Universal Basic Income, Citizen’s Income, Social Dividend, Universal
Grant, and Demogrant (Bullock and Alshami, 2019). The underlying intention in its conception is to
advance a genuine discourse that seeks to promote sufficient income for all, that will allow humans (for
Muslims) meet dharuriyaat (fundamental needs), thus guaranteeing a dignified living, irrespective of
their different work status.
Wealth in Islam is not positioned at the centre of the social order; it is more a matter for facilitation
of well-focused acts of worship such as observing obligatory daily prayers that require undiluted atten-
tion towards Allah (Subhanahu wa Taala) while being performed, paying charities due, going for Hajj
and Umrah among others. As clearly mentioned in the Qur’an, human beings in particular are created
to worship Allah (Subhanahu wa Taala) with the aim of earning His pleasures in this world and funda-
mentally in the hereafter. This however is achievable within supportive and conducive environmental
and other factors that include financial and non-financial resources. Consequently, the worldly resources
are not desirable in and of themselves but as a means (essential or otherwise) to a noble end. However,
it suffices to note here that Islam does not despise legitimate economic pursuits as Islam recognises
struggle and enterprise in worldly life. Thus, the researcher can unmistakably affirm that along the line
on the subject continuum of ‘wealth as centre of all activities’, and ‘fatalistic abhorrence of this world’,
Islam fits in somewhere in the middle.”
In Islamic jargon, the concept of wealth (al-mal) embraces movable and immovable property, accu-
mulated money, and an orphan’s wealth. All these types of wealth can fall under either lawful or unlawful
ones. While one’s lawful possessions can include things with or without commercial value, the jurists
considered wealth (al-mal) specifically as having “value with which it is exchangeable and such property

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upon destruction attracts payment of compensation’’. It also includes what the people would not usually
throw away or disown, such as money and the like.” In the views of the Hanafi School, wealth (al-mal)
is “a thing which is naturally desired by man [people], and can be stored for the time of necessity. It
includes movables (manqul) and immovable (ghayr manqul). Thus, according to Juristic definitions,
wealth is qualified by its commercial value, ownership and possession, storage, Shari’ah recognition of
its beneficial attribute, as well its assignable and transferable ownership attributes.
Poverty as a social disorder and a recurring phenomenon is an issue that stands as an affront to well-
being and stability of a Muslim and the Ummah, which Islam strives to alleviate. The various Islamic
terms for poverty originate from the root of the Arabic word for poverty, faqr, but which are categorised
into spiritual and material. In fact, the Prophet (May peace be upon him) sought for protection of Allah
(Subhanahu wa Taala) protection from its scourge in his prayers, something that signifies its abhorrence
in Islam. Thus Islam also keys in to myriads of debates over BI which are most especially focused on
alleviating poverty, seeing in BI a better way to address that than the current welfare systems. In addi-
tion, like other world religions, Islam provides guidelines to eliminate the negative effects of poverty on
society. An illustration of spiritual example of poverty is expressed in the following statement the Qur’an
as: Indeed you are those who are called to spend in the way of God, yet among you there are some who
hoard. And whoever hoards, hoards only from his soul. And God is the Rich, and you are the poor. And
if you turn away, He will exchange you for some other people. Then they will not be like you. (47:38).
However, much of Qur’an verses made reference to material poverty and indicated the imperatives
for solidarity to the deprived be extended in various spheres such as feeding, sheltering, and other forms
of deprived necessities. Indeed in the Qur’an, Allah (Subhanahu wa Taala) recognizes the fact that those
who are materially deprived and thus not wealthy have material needs and thus require other people’s
help to meet them.
In both the Qur’an and Hadeeths of the Prophet (May peace be upon him), there is an indication of
distinctive features of two categories of poor: (1) al-faqir and (2) al-miskin. In the former, an individual
is seen as al-faqir when: (i) he/she does not have enough to suffice him or herself, meaning not having
any wealth at all thus living in subsistence, and (ii) he/she is unable to earn living from work suitable,
or there is unavailable work they are capable to do. But for al-miskin, this category reflects on those that
possess some degree of wealth to spend on their needs, but which wealth is insufficient, for example,
someone genuinely needs $5 per day, but only has $3 or $4. This means that the considerations applicable
to poor people also apply to people who may be short of money. But in the midst of this, Islam enjoins
the pursuit of a balanced life, thus allowing and encouraging the pursuit of wealth on one hand, while
at the same time makes reprimands on illicit and ostentatious life style.

The Incidence of Poverty in Muslim Countries

Poverty manifests in different forms and dimensions such as economic, social and spiritual. These dimen-
sions stem from deprivations suffered through lack of access or limited access to economic resources,
low levels of required skills to exploit opportunities, health challenges, aging population, and political
manipulations to the disadvantage of vulnerable members of society among other factors. Poverty as
viewed by the Islamic development bank (IDB) has ‘a multifaceted phenomenon with at least four dimen-
sions which go beyond income alone’ (Islamic Development Bank Policy paper on poverty reduction,
2007). Firstly, there is the dimension that relates to opportunities in which case, there is lack of access
to the labour market, employment opportunity, mobility problems and time burdens. Secondly is the

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dimension that is associated with capabilities, thus there is lack of access to public services such as health
and education. Thirdly are the security dimension found in vulnerability to economic risks and to civil
and other domestic violence. Finally is the empowerment dimension arising from being without voice
and without power at the household, community, and in discussions at national level.
Perturbed by the disturbing trend in poverty levels, plethora of discussions in the academic community
globally, and indeed other communities around the world on state of poverty in Muslim communities,
especially in the Islamic Development Bank IDB (invariably OIC member countries which account for
nearly 22% of the world’s population, but 40% of the world’s extremely poor), several studies were com-
missioned. Consequently, the commissioned studies were undertaken which showcased the magnitude,
dimension and causes of the phenomenon. Among the studies is that of the Islamic Solidarity Fund for
Development (ISFD), an arm of the IDB which found that even though the world’s population living
in extreme poverty has reduced to more than half, falling from 1.9 billion in 1990 to 836 million in
2015; an estimated 504 million people in 43 out of the 57 IDB countries, mainly in South Asia and Sub-
Saharan Africa, are living in multi-dimensional poverty and are suffering from a range of deprivations
(Islamic Solidarity Fund for Development ISFD Strategy 2016-2025). As noted in the report, “Despite
marvellous inventions and discoveries that have led to unprecedented wealth generation globally, poverty
continues to prevail in some parts of the world in various forms.” According to Abubakar and Ringim
(2018), the living condition of Muslims in IDB member countries was aptly described as characterized
by ’Widespread poverty which is an enduring problem, and poverty alleviation has been a critical target
in development strategies for all states for the past three decades (Islamic Solidarity Fund for Develop-
ment ISFD Strategy 2016-2025).
For some specific studies on poverty in Arab countries, a study was commissioned by the league
of Arab states ministerial council for social affairs in conjunction with other bodies, for which a report
was prepared and published in May, 2017. It was found in the report that captured ten countries which
are classified in three clusters based on their poverty rates, that poverty in the Arab region is the result
of a sequence of historical, political and economic conditions. Such conditions contributed to a decline
in economic growth, which caused disruptions of social situations. In the report, for household poverty,
4 countries which are Jordan, Tunisia, Algeria, and Egypt fall under the very low levels of both acute
poverty and poverty category. In the second category are 2 countries which are Morocco and Iraq that
have low levels of acute poverty but medium levels of poverty. In the third category are the remaining
Least Developed Countries LDCs which are Comoros, Mauritania, Sudan and Yemen that are found
to have medium to high levels of acute poverty as well as poverty. Furthermore, the report employed a
methodology that analysed the extent and nature of multi-dimensional child poverty having considered
issues beyond material wealth.

Islamic Social Finance Instruments

Zakat

Zakat represents a system of wealth redistribution from those considered to be capable of contributing
their excessive wealth due, to those lacking enough. Allah (Subhanahu wa Taala) directed in Qur’an 2:
43 that “And establish prayer and give Zakat and bow with those who bow [in worship and obedience]”
Allah (Subhanahu wa Taala) also mentioned “And establish prayer and give Zakat, and whatever good
you put forward for yourselves - you will find it with Allah (Subhanahu wa Taala) . Indeed, Allah (Sub-

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hanahu wa Taala) of what you do, is seeing” (Qur’an 2:110). In another verse, Allah (Subhanahu wa
Taala) directed as follows: Charity is (meant) only for the poor, the needy, those working at (collecting
and distributing) it, those (possible converts) whose hearts are being reconciled (to yours, for freeing
captives and debtors, and in (striving along) Allah’s (Subhanahu wa Taala) way, and for the wayfarer, as
a duty imposed by Allah (Subhanahu wa Taala), Allah (Subhanahu wa Taala) is aware, wise. (Qur’an
9:60). Thus in the afore-mentioned verse, clear specification of recipients of Zakat has been made.
Basically, Zakat can be categorised into Zakat of wealth charged on nine items which are wheat,
barley, dates and dried grapes in the food grains group and their equivalents such as maize, corn, mil-
let; three in the animal group which are sheep/goats, camels and cows, as well as gold and silver that
fall into money group. Accordingly, Islam charges Muslims to give a token of their assets in form of
animals, farm output and money as mandatory alms. In the words of Ismail, Tohirin and Ahmad (2013),
Zakat of food grains becomes obligatory when wheat, barley, dates or resins reach a particular quantity
(Nisab). Specifically, for agriculture products, the quantity payable as Zakat varies according to how the
land is irrigated. If it is by rain, river springs etc. One – tenth 1/10 is given out after removing the chap
from the grains. However, when the land is irrigated by artificial means Zakat due is one –twentieth
1/20 after threshing. According to the consensus of Ulama, Zakat is due once the agricultural produce
is ripened on the farm and on the amount of grains which has been threshed after harvest. According to
the consensus of Ulamas, Zakat on agricultural produce are due on five awusq after threshing. Awusq
is a measure which corresponds to roughly sixty sa’a. One sa’a is equivalent to Four Muddul Nabiy.
Zakat on agricultural produce are on those foodstuffs that can be stored for extended periods of time.
However, Imam Abu Hanifa (May Allah reward him) is of the opinion that “Whatever a person planted
no matter the quantity small or large Zakat is compulsory upon the produce”.
For Zakat on money and associated forms of wealth, Ismail, Tohirin and Ahmad (2013) are of the
opinion that Zakat be charged on business entities. Furthermore, Ismail and Taufiq (2015) are of the
opinion that Zakat is also chargeable on financial instruments. This is in addition to the well-established
positions of charging Zakat on cash/money which stands as 2.5% of Nisab.

ZAKAT ON MUDARABAHH

Ibn Rushidi opined that the consensus of Mazhab Malik’s ulama was on the opinion that Zakat is on
the capital and profit gained by the owner of capital. However, Zakat on the shared profit gained by the
mudarib (entrepreneur) is categorized under three conditions:
Firstly: Zakat is due on the share of profit gained by the entrepreneur on the condition that the capital
reaches Nisab and completes a year. It shall also fulfill the following other conditions:

• The capital owner shall be a Muslim

• He is free from slavery
• He is not indebted
• The capital reaches Nisab
• The capital spent a year
• The entrepreneur has invested the capital for a year

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Secondly: Zakat is due on the profit gained by the entrepreneur without recourse to its relationship
with the capital if it fulfils the following conditions:

• The entrepreneur Shall be a Muslim

• He is free from slavery
• He is not indebted
• His share in the gained profit reaches Nisab
• He had invested the capital for a year

Thirdly: Consideration needs to be given to both ownership of capital and entrepreneurship. Thus,
the following conditions are to be fulfilled:

• Both shall be Muslims

• They are not indebted
• The capital and profit gained by owner of capital reaches Nisab
• The share of profit gained by the entrepreneur reaches Nisab
• The entrepreneur has invested capital for a year

In conclusion, Zakat is due on the capital invested in the contract of Mudarabah and the gained profit
shared between the parties to the contract provided it reaches Nisab and completes a year.

Zakat on Agricultural Produce (Mugharasa And Musaqat)

Musaqat, known as irrigation partnership is an Islamic mode of agriculture financing where one party
contributes specific plants/trees, for another to contribute in the form of irrigating with the objective of
sharing in the produce from the trees/plants in accordance with agreed sharing arrangement. Mugharasa
(agricultural) partnership is a form of financing that is partnership based. It operates where two parties
agree on the kind of contribution under which the partnership is made. One party may have a piece of
land to present for the other party to utilize in planting trees for example subject to stipulated condition
on sharing of proceeds from the venture.

Zakat on Shares (Musharakah)

Contemporary scholars on Shari’ah have classified Zakat on shares into two. There are those (scholars)
with the view that all shares in whatever company (halal) are subject of Zakat. The scholars with this
opinion include Sheikh Abu Zahra, Sheikh Abdulrahman Hassan, and Shekh Kkahallaf etc.
On the other hand, there are scholars with the view that before Zakat is due on shares in companies;
certain things have to be observed which include the type of shares and the basis for the purchase of the
shares. The scholars with this view include Shekh Abdulrahman Isah the author of Muamalatul hadisa
wa’ahkamiha.
The scholars have indicated that Zakat on shares is due only when it fulfils certain conditions on
profit or loss. Thus, computation of Zakat on shares is done without considering the time of purchasing
the shares e.g. assuming that shares are bought at N300,000 one year ago but the current price of the

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shares becomes N500,000 this year, Zakat will be computed on the basis of current price of this year
which is N500,000 and vice versa.
However it should be noted that Zakat on shares is mandatory only in a situation where by the own-
ers of the shares have access to the shares but Zakat is not due on the shares that are not visible to the
owner share holder.
Scholars have classified shares into 3 classes for the purpose of Zakat

• Shares in strictly professional business companies

• Shares in marketing companies
• Shares in business and marketing companies

SHARES IN STRICTLY PROFESSIONAL COMPANIES

All shareholding in strictly industrial/ professional companies such as Information Company, mining
company, extractive industries, transportation, hotels and guest houses, building and construction etc. are
not liable to Zakat. This is simply because all shares invested in these companies have been absorbed.
The only situation Zakat can be imposed on them is when profits are made and distributed to sharehold-
ers. The reason given by the majority of the scholars is that machinery and equipment are purchased
with share subscription proceeds.

SHARES IN STRICTLY BUSINESS/MARKETING ORIENTED COMPANIES:

These are companies involved in import and export activities, agricultural commodities marketing,
banks, automobile sales and all other companies that are marketing oriented and not manufacturing or
production oriented. Shareholders in these companies are expected to pay zakat so long conditions for
Zakat are satisfied.

SHARES IN PROFESSIONAL AND BUSINESS/MARKETING COMPANIES:

Zakat on shares in companies that fall in this category such as textile industries, oil and Gas Company,
mining industry is determined by separating portion of capital utilized for asset acquisition from work-
ing capital. The working capital portion bears Zakat and that is the view of the majority of the scholars.
Giving Zakat remains a cardinal part of Islam and contributes immensely towards creation and sus-
tenance of virile economic atmospheres across Muslim societies in the globe, which in turn assists in
tackling the scourge of poverty. The Muslim Ummah is never meant to live in absolute abject poverty,
hence Allah’s (Subhanahu wa Taala) injunctions on wealth redistribution, which are many and clearly
stated in the Qur’an and Sunnah of the Prophet (May peace be upon him). Zakat is vital as it has several
positive impacts on the macroeconomic variables in the society. Zakat when distributed to the needy,
results in generating flow of funds and recruitment of manpower. As mentioned by Abubakar (2016),
the importance of Zakat, especially to Muslim community, can be considered as comparable and com-
plementary to the social security system that exists in many developed countries. Ismail, Tohirin and

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Ahmad (2013) further emphasized on the need for continuous circulation of money as a form of wealth
to sustain economic activities. Furthermore, besides the traditional recipients of Zakat, in the absence of
such recipients, an issue arises on whether Zakat funds can be channeled to establishment and sustenance
of educational institutions, vocational training and rehabilitation to make groups or individuals more
productive, establishment of agriculture and cottage industries, provision of fixed assets and equipment
to small business projects, provision of working capital, building of low-cost housing, providing medi-
cal treatment and health care, etc.
Thus, where Zakat charges are appropriately levied, collected and distributed to the beneficiaries,
wealth circulation is entrenched and economic as well as social empowerment are conferred on the
recipients. By so doing, skills and competencies that are left dormant become activated given a new
horizon of economic and financial inclusion in Zakat.

WAQF

Waqf is a religious endowment that represents a voluntary exercise existing well over 1400 years since
the time of the Prophet (May peace be upon him), (Waqf was not mentioned in the Qur’an). It is an
arrangement in which the owner of a movable or immovable property relinquishes his/her ownership
mostly on perpetual basis, for the benefit of his/her specified categories of people or for general public
use. Kahf (2000) opines that Waqf can be philanthropic or public Waqf (where the intended benefits
are for general public utilisation), family or private Waqf (meant exclusively for family and descendants
of the endower, and for religious purposes only. According to Kahf and Mohomed (2017), the first
Waqf instituted in Islam was the establishment of Masjid Quba’a in Madinah which was followed by
Masjid Nabawi (Prophet’s mosque). According to Anwar (2017), Waqf is the endowment of resource
in perpetuity and preserving it for the benefit of certain philanthropic acts and prohibiting the use or
disposition of it outside the specified objectives of the Waqf and the wishes of the endower. In modern
times, some Islamic jurists have made case and justification for cash Waqf to be part of what can be a
subject of Waqf. Magda (2009) defines cash Waqf as confinement of an amount of money or cash from
the founder who dedicates its usufruct in accordance with his/her specified conditions, perpetually for
the benefit of society. Anwar (2017) states that there are four pillars which Waqf stands on. These are
the Wāqif (Endower), an endowed property (Mawqūf), Waqf contract deed (Waqfī’ah) and beneficiaries
of the endowment (Mawqūf ‘alayh)
Waqf as an Islamic philanthropy tool is a veritable opportunity for empowerment if deployed prop-
erly. Waqf provides physical infrastructure that could be turned around to generate funds. Baskan (2002)
emphasized that Waqf flourished during the Ottoman Empire to such an extent that a person born at that
time, would have transited from cradle obtained from Waqf when born in Waqf house, eaten and drunk
from Waqf properties, educated, earned salary income, up to placement in Waqf coffin after death, and
burial in Waqf cemetery.
In current dispensation as well, there are myriads of areas of deployment for Waqf meant for educa-
tional, health, religious, entrepreneurial and skill acquisition training, water provision and other social
services. The targeted recipients include orphans, the destitute, widows, disabled, fire and accident
survivors and the general public.

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For effective deployment of Waqf resources, there are three key issues that require attention for optimal
Waqf management that would deliver desired results to target beneficiaries. These are the collection,
management and reporting of activities.
An important consideration in Ummah empowerment through Waqf is the imperative for skill acquisi-
tion component to be included in reaching out to capable beneficiaries of Waqf. This is deemed essential
given the teeming number of unemployed youth who are not accommodated in the public and private
sectors in spite of rising population levels. Through this Waqf productive basis, financial inclusion will
be enhanced and by extension, entrepreneurship will be promoted, while small and medium enterprises
development could be enhanced. To ensure sustainability of Waqf, a robust arrangement that allows for
investment of Waqf fund in activities that generate revenue is highly desirable so that costs associated
with maintenance of Waqf assets and their improvements among other costs are covered.

SADAQAH

This is an equally important tool for solidarity, empowerment of Ummah, and a way of fostering societal
cohesion recognised and emphasised in Islam. In many verses in the Qur’an and traditions of the Prophet
(May peace be upon him), Allah (Subhanahu wa Taala) and His messenger have emphasised the virtues
and rewards (worldly and in the hereafter), that are associated with giving Sadaqah. Essentially, Sadaqah
entails voluntary giving to the needy by both rich and poor with the aim of seeking Allah’s (Subhanahu
wa Taala) pleasure and reward alone, and not expecting any reward from the recipient. Sadaqah can
be given in form of food items, water, cash, clothes, books, medicine, giving rightful advice to people,
making Du’a for another’s benefit, spreading knowledge, etc.
Abu Malik al-Ashari (May Allah be pleased with him) has reported that the Prophet (May peace be
upon him) stated: “Cleanliness is half of faith. Alhamdulillah (Praise be to Allah (Subhanahu wa Taala)
fills the scale. SubhanAllah (Glory be to Allah) and Alhamdulillah (Praise be to Allah) fill up what
is between the heavens and the earth. Prayer is a light. Charity is proof (of one’s faith). Endurance is
brightness and the Qur’an is a proof on your behalf or against you. All men go out early in the morning
and sell themselves, thereby setting themselves free or destroying themselves (Muslim, 432). In another
hadeeth of the Prophet (May peace be upon him), he stated as reported by Abu Hurairah (May Allah be
pleased with him) “Charity does not in any way decrease the wealth and the servant who forgives, Al-
lah (Subhanahu wa Taala) adds to his respect; and the one who shows humility, Allah (Subhanahu wa
Taala) elevates him in the estimation (of the people).” (Muslim Vol. 4, Hadith 6264). Furthermore, the
Prophet (May peace be upon him) said, “Every Muslim has to give in Sadaqah (charity).” The people
asked, “O Allah’s (Subhanahu wa Taala) Messenger (May peace be upon him) if someone has nothing
to give, what will he do?” He said, “He should work with his hands and benefit himself and also give
in charity (from what he earns).” The people further asked, “If he cannot do even that?” He replied,
“Then he should help the needy who appeal for help.” Then the people asked, “If he cannot do that?”
He replied, “Then he should perform all that is good and keep away from all that is evil and this will be
regarded as charitable deeds.” (Bukhari Vol. 2, Hadith 524)
Sadaqah is meant for uplifting the economic and social conditions of highly deprived segments of
society. It is not restricted in amount as in the case of Zakat where condition of nisaab has to be met.
In this sense therefore, large eligible segments in society can be covered as recipients of Sadaqah as
any willing member (both rich and poor) of society is encouraged to give Sadaqah without restriction

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or set minimum or maximum amount. The strength of Sadaqah giver’s faith and desire to earn Allah’s
(Subhanahu wa Taala) reward is the driving force in Sadaqah. Sadaqah giving has the potential of
diverting away extravagant spending away to meeting less complex needs of weak members of society
thus fostering ties among Muslim Ummah.

ISLAMIC MICROFINANCING (VIA QARD CONTRACT)

As mentioned by Abdul Rahman (2010), Microfinance means “programme that extend small loans to
very poor people for self-employment projects that generate income in allowing them to take care of
themselves and their families”. Abubakar (2015) stated that Islamic micro finance is a pro poor mecha-
nism which recognizes a substitute to collateral in the form of joint accountability and liability, and more
importantly divorced from interest element. Essentially, Islamic micro finance seeks to reach out to the
poor that are excluded from accessing loans from Islamic banks. Customers such as rural farmers, ani-
mal feed millers, poultry and fish farmers, automobile mechanics and vulcanises, printers and artisans,
welders, bakery and confectionaries workers, etc. that are in need of smaller amounts as loan (Qard),
are expectedly accommodated in the micro finance arrangements. Abubakar (2015) asserts that Islamic
micro finance has the potential of being a catalyst in poverty minimization, could facilitate economic
growth of the poor and bring about greater cooperation among participants who more often than not
operate as groups/cooperatives.
Through micro finance facilities, the poor benefit from financial assistance through Qard contract
which boosts self-employment and alleviates poverty especially in rural communities. A group-based
lending mechanism where collateral free loans that are also interest free attracting service charge only
is utilised. Eligible persons are selected to enjoy the facility after evaluation of their monthly income to
determine whether they fall as either hard core poor or absolute poor.
Islamic micro finance evolved in response to the gap left due to the inability of Islamic banks to meet
the genuine demand for small finances by small scale entrepreneurs and businesses. Those individuals or
businesses have skills and market share but lack the financial resources needed to actualise their potentials,
but which banks that deal in large scale companies are not favourably positioned to service. There are
several contracts underlying Islamic micro finance such as Murabahah, Musharakah and Murabahah,
but for certain categories (normally who are endowed with skills but are underutilised), Qard-e-Hasana
(benevolent loans) is the only means that could accommodate the needs of those categories of people.

ISSUES, CONTROVERSIES, PROBLEMS

Why Empowerment Becomes an Issue

Economic, social and other forms of empowerment in human societies in general, and most especially
Muslim societies are an antidote to social upheavals that manifests in several dimensions. As noted by
Anwar (2017), “A large part of the world’s population is deprived of employment, the right to work, an
adequate standard of living, healthcare and education, triggering poverty, which remains one of the big-
gest challenges to socio-economic development in developing countries.” Social upheavals include riots,
robberies, arson and murder, frauds, kidnappings, raping, communal clashes, illicit human trafficking,

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and terrorism among others. Such disorders arise partly as consequences of broken home syndromes
occasioned by marriage failures, peer group negative influences especially among youths and women,
long term deprivations experiences leading to frustrations and despondency, etc.
As human life is an interwoven structure that exists and thrives only through mutual dependence by
participants, therefore there are no unimportant participants. Arising from the above, empowerment of
weak participants in accordance with the peculiarities of their legitimate needs is necessary as it would
activate and strengthen their capabilities to make meaningful contributions to societal well-being. As
Islamic social finance seeks to accommodate specific categories of people in the Muslim Ummah, and
thus fill in perceived vacuums that Islamic banking fails to reach to, the researcher recognises that aside
the original imperatives for the accommodation of certain classes of people as beneficiaries, contemporary
situations have allowed a revisit to accomplish financial inclusion and thus get across other beneficiaries.
Among the other beneficiaries as prescribed as prescribed in Qur’an and traditions of Prophet (May
peace be upon him), are the poor, the travelers who lost their transport money, the physically incapaci-
tated, widows, orphans, the aged senior citizens who have n other sponsors, underprivileged children,
the bankrupt who are certified as so and not found negligent or extravagant, etc. In modern times, the
researcher took note of peculiarities of our time in identifying who qualifies for eligibility to receive
Islamic social intervention.
The four Islamic social finance instruments discussed are veritable instruments that offer solutions
to widespread poverty occasioned by ignorance, concentration of resources in few hands, and capacities
underutilisation which ushered despondency and apathy in the Muslim Ummah. But true realisation of
potentials in these instruments is dependent on effective and efficient implementation of each of the
instruments in modern societies and settings.
Therefore, to achieve an effective and efficient mobilisation and distribution of financial resources
based on the instruments, recognition of each instrument in national agenda of countries as a public policy
document, encapsulated in an overall Islamic economic master plan along with appropriate legal backing
for countries is essential. To facilitate this, Abubakar and Ringim (2018) have proposed a framework for
assessing availability of socio-economic policies based on Maqasid-al-Shari’ah in Muslim countries as
data are important in prescribing policies.
For a wider coverage and improved financial inclusion of segments of Ummah that are excluded,
deployment of the emerging Islamic financial technology (i-fintech) apparatus is highly desirable. In
this sense, crowd funding supported by financial technology innovations will hopefully promote more
financial inclusion of Muslim Ummah far and near.
For instance, on Zakat mobilisation and distribution, the Ummah can borrow leaf from Britain’s
National Zakat fund approach to its distribution. In its approach, NZF divided the 8 classes of recipients
of Zakat into three areas of poverty relief and economic empowerment, community development, and
administration for its operational and organisational purposes. In this sense, Zakat when pooled together
are distributed to the poor, the needy, to freeing those in bondage, to those in debt, and the stranded
traveler. All these recipients are considered under the poverty relief and economic empowerment section.
The three other recipients are those in the cause of Allah (Subhanahu wa Taala), those who work for its
mobilisation and distribution, and for bringing hearts together. These are considered under community
development section. Applications for Zakat are evaluated by skilled teams to assess the veracity to
claims presented as received from hospitals, mosques, police stations and charities.

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Crowd funding, being a veritable mechanism that is conveniently enabled by the fin-tech innova-
tion, stands as an effective and efficient means of mobilising resources. As noted by Thaker, Thaker
and Pitchay (2017), crowd funding represents collection of funds in small amounts from many crowd
funders on web-based platforms for specific projects, business ventures and or for social causes. It of-
fers advantage of crowd-based decision making and innovation and applies so to funding of projects.
For Waqf, in addition to movable and immovable assets that can be committed, in contemporary
periods, cash Waqf stands as a valid component of Waqf that could be mobilised and distributed via the
crowd funding platform. To avoid chaotic arrangements in Waqf, proper record keeping and documen-
tations of Waqf properties and valid deed that governs its practice becomes necessary. Furthermore,
for sustainable Waqf arrangements, a model proposed by Anwar (2017) represents a veritable and well
thought out arrangement. In the model, Anwar (2017) posited a Waqf-Islamic social entrepreneurship
ISE approach that is modelled on ISE, which in turn is designed on the faith, the social aspects of com-
mon good and entrepreneurship based on Islamic teachings. Specifically, as stressed by Anwar (2017),
the Waqf institution can either directly engages in the ISE ventures like an Islamic Social Enterprise
or in a profit and loss agreement with other social entrepreneurs like a special purpose funding house.
Instruments such as Musharakah (business partnership) can be utilized when engaging in business part-
nership while Mudarabah (venture capital or financing a profit-sharing venture) can be deployed when
financing a profit-sharing venture.

CONCLUSION

Having presented the Islamic social finance instruments of Zakat, Waqf, Sadaqah, and Islamic micro
finance with reference to their origins in Islam, their structures, types, their relevance to poverty reduction
and empowerment of the Ummah, it is important to emphasize on what would be the down payments
for an effective deployment of the instruments. In the list of the key ingredients needed to actualise
the potentials of poverty reduction and thus empowerment of the Ummah include the involvement of
constituted authorities in Muslim countries’ jurisdictions at different levels. Governments in Muslim
countries are expected to facilitate the propagation of the need for charity giving as part of discharging
the obligation on meeting the entitlements of Allah’s (Subhanahu wa Taala) servants on earth. This is
achievable where governments collaborate with religious institutions and humanitarian organisations
in propagation of the ideals contained in the instruments. This is more so given the fact that Islamic
financial institutions such as Takaful operators, Islamic banks, Islamic capital markets and the rest of
them, were fundamentally been structured to only facilitate the transmission of financial resources from
the surplus to the deficit sectors on business oriented arrangements.

CLASSIFICATIONS

JEL Classification: D14, D31, D60

KAUJIE Classification: B5, C55, E22

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